chapter 4 internal assessment test bank david tif ch04 doc

Opportunities are a firm’s distinctive competencies that cannot be easily matched orimitated by competitors.Ans: F

2.

The process of performing an internal audit, compared to the external audit, providesmore opportunity for participants to understand how their jobs, departments anddivisions fit into the whole organization.Ans: T

3.

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Page: 123

An internal audit task force of managers could be charged with determining aspecific number (usually 10 to 20) of the most important strengths and weaknesses.Ans: T

Page: 124

The Resource-Based View4.

Proponents of the resource-based view argue that external factors are moreimportant than internal factors for a firm in achieving and sustaining competitiveadvantageAns: F

5.

Page: 125

The basic premise of the research-based view is that the mix, type, amount andnature of a firm’s internal resources should be considered first and foremost indevising strategies that can lead to sustainable competitive advantage.Ans: T

Page: 125

Integrating Strategy and Culture6.

The subtle, elusive and largely unconscious forces that shape the workplace arecaptured by the organizational culture.Ans: T

A limitation of financial ratios is the fact that they are based on accounting data.Ans: T

Page: 145

Production/Operations48.

Capacity decisions concern the design of the physical production system.Ans: F

49.

In most industries, only minor costs of producing a product or service are incurredwithin operations, so production/operations does not have great value as acompetitive weapon in a company’s overall strategy.Ans: F

Four common approaches to determine R&D budget allocations used successfullyare: (1) finance as many project proposals as possible; (2) use a percentage-of-salesmethod; (3) budget for R&D about what competitors spend; or (4) decide how manysuccessful new products are needed and work backwards to estimate the requiredR&D investment.Ans: T

52.

Page: 151

Internal R&D and contract R&D are the two basic forms of R&D in organizations.Ans: T

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53.

Spending on research and development is steadily decreasing in the United States.Ans: F

Page: 152

Management Information Systems54.

The functions of information systems are growing in importance becauseorganizations are becoming more complex, decentralized and globally dispersed.Ans: T

Page: 153

Value Chain Analysis (VCA)55.

Value Chain Analysis can enable a firm to better identify its own strengths andweaknesses especially as compared to competitors’ Value Chain Analyses.Ans: T

56.

Although a useful step in the strategic management process, value chain analysiscan rarely help a firm monitor whether its prices and costs are competitive.Ans: F

57.

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Page 155

Benchmarking is an analytical tool used to determine whether a firm’s value chainactivities are competitive compared to rivals.Ans: T

Who should perform an internal audit?a.A private auditing firmb.The organization’s accounting departmentc.Managers from different units of the organizationd.A team of top-level managers and lower-level employeese.The chief executive officerAns: c

Organizational resources include all of the following except:a.employee training.b.firm structure.c.planning processes.d.information systems.e.copyrights.Ans: a

65.

Page: 117

Empirical indicators are resources that are either rare, hard to imitate, ora.expensive.b.inexpensive.c.easily substitutable.d.not easily substitutable.e.inefficient.Ans: d

Page: 117

Integrating Strategy and Culture66.

A pattern of behavior developed by an organization as it learns to cope with itsproblems of external adaptation and internal integration that has worked wellenough to be considered valid and to be taught to new members as the correctway to perceive, think and feel is calleda.dysfunctional behavior.b.groupthink.c.behavior modification.d.organizational culture.e.internal audit effect.Ans: d

67.

Page: 118

Which of the following is not a cultural product?a.Ritesb.Emotionsc.Ritualsd.Sagase.SymbolsAns: b

What are historical narratives describing the unique accomplishments of a groupand its leaders, usually in heroic terms.a.ritesb.sagasc.storiesd.mythse.folktalesAns: b

70.

Life-directing attitudes that serve as behavioral guidelines are calleda.values.b.rites.c.beliefsd.metaphorse.legendAns: a

71.

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Page: 119

In Europe, it is generally true that the farther __________ on the continent, themore participatory the management style.a.southb.eastc.westd.northe.southeastAns: d

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72.

Americans place an exceptionally high priority on __________ whereas manyforeigners place more worth on __________.a.time; relationshipsb.relationships; timec.silence; timed.silence; relationshipse.close personal distance; ample personal distanceAns: a

Page: 122

Management73.

What is the essential bridge between the present and the future that increases thelikelihood of achieving desired results?a.Motivatingb.Planningc.Controllingd.Staffinge.OrganizingAns: b

74.

All of the following are basic duties of a manager except:a.staffing.b.planning.c.consolidating.d.organizing.e.motivating.Ans: c

75.

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Page: 123

What is an up-front investment in success?a.Planningb.Organizingc.Motivatingd.Staffinge.ControllingAns: a

Page: 123

78

76.

Which function of management includes areas such as job design, job specification,job analysis and unity of command?a.planningb.organizingc.motivatingd.staffinge.controllingAns: b

77.

Who does a planning horizon of two to five years applies to?a.top managementb.general managementc.middle managementd.lower managemente.all levels of managementAns: a

78.

Page: 124

Synergy isa.synthetic energy.b.when a team effort is used to achieve desired results.c.when individuals work separately to achieve desired results.d.when financial expectations of the firm are decided upon.e.employee energy.Ans: b

All of the following are key questions that can reveal internal strengths andweaknesses in the management department except:a.Is the organization’s structure appropriate?b.Are reward and control mechanisms effective?c.Are the organization’s products positioned well among competing products?d.Does the firm use strategic management concepts?e.Do managers delegate authority well?Ans: c

Page: 128

Marketing87.

Opportunity analysis is one of the basic functions ofa.marketing.b.management.c.computer information systems.d.production/operations.e.research and development.Ans: a

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88.

_______ can reveal the demographic characteristics of an organization’s customers.a.Customer profilingb.Test marketingc.Market developmentd.The vision statemente.TelemarketingAns: a

89.

________ is not considered to be a function of marketing.a.Market segmentationb.Marketing researchc.Customer analysisd.Opportunity analysise.DistributionAns: a

Which of the following is not a key question that can reveal internal strengths andweaknesses of the marketing department?a.Does the firm have an effective sales organization?b.Is our product quality good?c.Are markets segmented effectively?d.Are the firm’s products and services priced appropriately?e.Does the firm have good liquidity?Ans: e

Page: 132

Finance/Accounting95.

Which of these is the allocation and reallocation of capital and resources to projects,products, assets and divisions of an organization?a.Investment decisionb.Dividend decisionsc.Financing decisionsd.Restructuring decisionse.Strategic decisionAns: a

96.

Page: 133

Which decision concerns determining the best capital structure for the firm andincludes examining various methods by which the firm can raise capital.a.investmentb.dividendsc.financingd.capital budgetinge.implementationAns: c

Page: 133

83

97.

What category of ratios measures a firm’s ability to meet maturing short-termobligations?a.Profitabilityb.Liquidityc.Leveraged.Activitye.GrowthAns: b

98.

What category of ratios includes return on total assets and return on stockholders’equity?a.leverageb.activityc.profitabilityd.growthe.liquidityAns: c

99.

Page: 135

Page: 135

What category of ratios measures how effectively a firm can maintain its economicposition in the growth of the economy and industry?a.profitabilityb.liquidityc.leveraged.activitye.growthAns: e

Page: 135

Production/Operations100.

According to Roger Schroeder, which of the following is not a basic function ofproduction management?a.Capacityb.Inventoryc.Workforced.Transportatione.QualityAns: d

Page: 139

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101.

_______ management deals with inputs, transformations and outputs that varyacross industries and markets.a.Marketingb.Financialc.Research and Developmentd.Production/operationse.DistributionAns: d

Page: 139

Research and Development102.

______ has been successful in determining R&D budget allocations.a.Financing as many project proposals as possibleb.Using the percentage of sales methodc.Budgeting for R&D about what competitors spendd.Deciding how many successful new products are needede.All of the above have been usedAns: e

Page: 143

Management Information Systems103.

Which of the following ties all business functions together and provides the basis forall managerial decisions?a.Managementb.Marketingc.Informationd.Technologye.WorkforceAns: c

104.

Page: 144

A management __________ receives raw material from both the external andinternal evaluation of an organization.a.advisorb.information systemc.consultantd.strategic systeme.accountantAns: b

The initial step to implementing value chain analysis isa.attaching a cost to each discrete activity.b.establishing costs in terms of time.c.establishing costs in terms of money.d.converting the cost data into information by looking for competitive coststrengths and weaknesses.e.dividing a firm’s operations into specific activities or business processes.Ans: e

Page: 146-147

The IFE Matrix108.

Which of the following is the first step in developing an IFE Matrix?a.Determining the organization’s structureb.Summing the weighted scores for each variablec.Identifying the organization’s strengths and weaknessesd.Identifying the organization’s functions of businesse.Determining the lead strategistAns: c

Page: 147

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109.

The IFE Matrix should be _____________ in multidivisional firms.a.constructed for each divisionb.all-inclusivec.constructed only for the major divisionsd.developed before the EFE Matrixe.revised monthlyAns: a

Page: 148

Essay Questions110.

Explain the resource-based view and its relation to strategic management.The resource-based view (RBV) approach to competitive advantage contends thatinternal resources are more important than external factors for a firm in achievingand sustaining competitive advantage, in contrast to the I/O theory. According tothis view, organizational performance is determined by physical resources, humanresources and organizational resources. RBV theory asserts that resources areactually what help a firm exploit opportunities and neutralize threats. The theoryalso asserts that in order to maintain a competitive advantage, a resource musteither be rare, not easily substitutable, or hard to imitate. The RBV has continuedto grow in popularity and continues to seek a better understanding of therelationship between resources and sustained competitive advantage.Page: 125

111.

Identify and give an example of six cultural products.Student answers will vary. However, they should include and give examples for anyof the following: rites, ceremonial, ritual, myth, saga, legend, story, folktale, symbol,language, metaphors, values, belief and heroes/heroines. These products areexplained further in Table 4-1 on page 127Page: 127

Identify the five basic functions of management, and describe each function.The five basic functions of management are planning, organizing, motivating,staffing and controlling. Please refer to Table 4-3 on page 132 in the text for thedescriptions of each function.Page: 131-136

There are seven basic functions of marketing. List and define these functions.The seven basic functions of marketing are (1) customer analysis, (2) sellingproducts/services, (3) product and service planning, (4) pricing, (5) distribution, (6)marketing research and (7) opportunity analysis. Students should define each ofthese functions.Page: 136

116.

According to James Van Horne, what are the three decisions that comprise thefunctions of finance? Describe each function.The three basic functions of finance, according to James Van Horne, are theinvestment decision, the financing decision and the dividend decision. Theinvestment decision is the allocation and reallocation of capital and resources toproject, products, assets and divisions of an organization. The financing decisiondetermines the best capital structure for the firms and includes examining variousmethods by which the firm can raise capital. Dividend decisions concern issues suchas the percentage of earning paid to stockholders, the stability of dividends paid overtime and the repurchase or issuance of stock.Page: 141

88

117.

Identify the reasons dividends are sometimes paid out even when funds could bebetter reinvested in the business or when the firm has to tap outside sources to paythe dividends.Dividends are sometimes paid out even when funds could be better reinvested in thebusiness or when the firm has to obtain outside sources of capital. The reasons forthese situations are as follows. (1) Paying cash dividends is customary. Failure to doso could be thought of as a stigma. A dividend change is considered a signal aboutthe future. (2) Dividends represent a sales point for investment bankers. Someinstitutional investors can buy only dividend-paying stocks. (3) Shareholders oftendemand dividends, even in companies with great opportunities for reinvesting allavailable funds. (4) A myth exists that paying dividends will result in a higher stockprice.Page: 141

118.

Discuss what needs to be completed, besides the calculation and interpretation ofratios, to complete an effective financial ratio analysis.The analysis should be conducted on three separate fronts:1. How has each ratio changed over time? This information provides a means ofevaluating historical trends. It is important to note whether each ratio has beenincreasing, decreasing, or nearly constant historically. For example, a 10 percentprofit margin could be bad if the trend has been down 20 percent each of the lastthree years. But a 10 percent profit margin could be excellent if the trend has beenup, up, up. Therefore, calculate the percentage change in each ratio from one yearto the next to assess historical financial performance on that dimension. Identifyand examine large percent changes in a financial ratio from one year to the next.2. How does each ratio compare to industry norms? A firm’s inventory turnoverratio may appear impressive at first glance, but may pale when compared toindustry standards or norms. Industries can differ dramatically on certain ratios.For example grocery companies such as Kroger have a high inventory turnoverwhereas automobile dealerships have a lower turnover. Therefore, comparison ofa firm’s ratios within its particular industry can be essential in determiningstrength/weakness.3. How does each ratio compare with key competitors? Oftentimes competition ismore intense between several competitors in a given industry or location thanacross all rival firms in the industry. When this is true, financial ratio analysisshould include comparison to those key competitors. For example, if a firm’sprofitability ratio is trending up over time and compares favorably to the industryaverage, but it is trending down relative to its leading competitor, there may bereason for concern.Page: 145

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119.

Discuss the limitations of financial ratio analysis.There are some limitations of financial ratio analysis. The first is that financial ratiosare based on accounting data, and firms differ in their treatment of such items asdepreciation, inventory valuation, R&D expenditures, pension plan costs, mergersand taxes. Second, seasonal factors can influence comparative ratios. A thirdlimitation is that departures from industry averages do not always indicate a firm isdoing especially well or badly.Page: 145-146

120.

According to Roger Schroeder, there are five basic functions or decision areas inproduction. Describe these five functions.The five basic functions or decision areas in production are process, capacity,inventory, workforce and quality. Please refer to Table 4-5 on page 147 in the textfor descriptions of each function or decision area.Page: 147

121.

Four basic approaches exist to determine R&D budget allocations. What are theseapproaches? Which one would you recommend for a pharmaceutical company?Why?The four approaches to determining commonly used R&D budget allocations are:(1) financing as many project proposals as possible; (2) using a percentage-of-salesmethod; (3) budgeting about the same amount competitors spend for R&D; and (4)deciding how many successful new products are needed and working backward toestimate the required R&D investment.Students should recommend the fourth approach for a pharmaceutical company,deciding how many successful new products are needed, and work backward toestimate the required R&D investment, because most firms have no choice but tocontinually develop new and improved products because of changing consumerneeds and tastes, new technologies, shortened product life cycles and increaseddomestic and foreign competition. Students should also mention that differentstrategies require different R&D capabilities, so no one approach will be appropriatefor all companies at all times.Page: 151

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122.

Discuss the five steps involved in performing an IFE Matrix.The first step is to list ten to twenty internal factors, including strengths andweaknesses using percentages, ratios and comparative numbers. The second stepis to assign a weight that ranges from 0.00 (not important) to 1.0 (all-important) toeach factor based on its relative importance. The third step is to assign a 1 to 4rating to each factor to indicate whether that factor represents a major weakness, aminor weakness, a major strength, or a minor strength. Next, multiply eachfactor’s weight by its rating to determine a weighted score for each variable.Finally, sum the weighted scores for each variable to determine the total weightedscore for the organization.Page: 157-158